Condé Nast’s hold on Reddit slips but Newhouse family has cushion

Here’s why the Newhouse family is not facing the same kind of pressure as, say, Henry Luce’s old company, Time Inc.

Little noticed in the hoopla that Chinese behemoth Tencent had made a $150 million investment in the latest $300 million class-D funding round for Reddit was the reduced ownership role Condé Nast and its parent company, the Newhouse-owned Advance Publications, now have in the latest Silicon Valley darling.

But the reduction does not matter, because it brings in assets. The Condé Nast-Advance Reddit stake is estimated to be in the range of 30 to 35 percent, and the investment carries a book value of about $1 billion now. Tencent is estimated to have about 5 percent.

A dozen years ago, Condé Nast paid Reddit co-founders Steve Huffman and Alexis Ohanian around $10 million (with an “m”) for 100 percent of the company that soon became known as the front page of the internet.

Huffman, the current CEO, said he plans to use the new round of funding to chase mobile-ad and video-ad dollars to take shares from Facebook and Google. Ohanian, now a venture capitalist, is married to tennis ace Serena Williams.

At the time of the purchase, Condé Nast was realizing that it was having a hard time attracting top-flight talent from the tech world to a family-owned, legacy media outfit back in New York that published Vogue, Vanity Fair and the New Yorker.

The coin of the realm for techies is not glitz, glamour and stretch limos but rather long, hard hours and stock options. Get in on the ground floor — or maybe the second or third floor — and ride to the penthouse when the company gets sold or does an IPO. In April 2018, Reddit was spun off as an independent company.

After that first round, Condé Nast chipped in maybe another $30 million in the ensuing years through four rounds of funding that raised just north of $500 million for Reddit.

With this latest round, Reddit has a book value of about $3 billion (with a “b”) — up from the $1.8 billion valuation it had in 2017 when it raised $200 million in its previous fund round.

Oh, and guess who is going to remain the sole Advance-Condé Nast representative on the Reddit board of directors? None other than Bob Sauerberg, the man who is being forced out as CEO of domestic Condé Nast Publications as it merges with London-based Condé Nast International into one trans-Atlantic entity. The search for a new CEO to oversee both New York and London is still in the very earliest stages, with no sign of a replacement on the horizon.

Of course, the Reddit valuation is still on paper only, and more than a few rumored IPOs from the likes of BuzzFeed and Vice Media seem to be on permanent hold. But the Newhouse family also had turned some of its stock in Discovery into a $500 million investment fund as it scouts for a big hit. In the meantime, it still has the $10.6 billion that it received from selling its Syracuse-based Bright House Networks, which today is part of cable powerhouse Spectrum — with Advance keeping a minority stake. And so, even as Condé Nast continues to bleed red ink and its newspaper holdings struggle, there is a fairly large cushion.

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